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Challenges of Launching an SVOD Service - Balancing Free and Paid Video Content

By Chris Smith on December 06, 2017

One of the initial challenges of launching a direct-to-consumer video business is finding the right balance between free and paid content. In order to gain more control audience, revenue and content, many content owners have moved away from free platforms like YouTube and launched their own subscription video service.

The transition from free to paid isn't always straightforward and one of the initial challenges is deciding the best strategy for monetizing content. For a video business to be successful, it’s critical to balance free content that attracts new subscribers and monetizing premium or exclusive content to generate revenue.

Can You Rely on YouTube?

Many content owners and creators get their start by building their audience and brand on free platforms like YouTube and Vimeo. There are many great things about leveraging these platforms, including the fact that it is free to use and has the potential to reach enormous audiences.

That said, many content owners have seen their YouTube revenue fall away due to dramatic recent changes in the platform's content policies and ad-revenue splits. Although a free platform may work initially, it stops making sense once a video provider has developed their own loyal and activated audience that regularly returns to consume new content.

Beyond the growing gap in ad-revenue splits, YouTube has also implemented stricter content policy rules that have drastically changed the criteria videos must meet to be eligible for inclusion in the advertising pool. These severe limitations have had enormous revenue and distribution implications for the content owners who rely on youtube.

In any case, you'll want to avoid censorship as you build your video business.

Going Direct-to-Consumer

For many content owners, YouTube is no longer an effective platform to monetize content. It’s one of the driving reasons video businesses have chosen to go direct-to-consumer and distribute their content to properties they own and control, such as their own website and custom set-top or mobile apps.

70% of U.S. broadband subscribers have an OTT video service, of which 27% have three or more subscriptions. The number of people using a subscription video service is on the rise and it’s brought enormous opportunity for anyone with a library of content and a substantial audience to launch a service of their own. Yet, the transition from a free platform to a subscription service isn’t always a smooth one— YouTube and subscription audiences are very different. Figuring out how to effectively monetize premium content, while continuing drive brand awareness and new subscriptions with free content is a key challenge when launching an SVOD service. How do you figure out the right balance?

Balancing Free and Paid content

Growing the number of subscribers is always a primary concern for SVOD services, yet it shouldn’t come at the cost of losing viewers. Even if the content has a low paywall, a subscription fee will be a deterrent to many of your viewers. In order to continue to grow subscribers, it’s critical for an SVOD service to find the right balance between paid and free content.

Benefits of Free Ad-Supported Content

Free ad-supported content is beneficial for the viewer and the OTT service provider. The audience is happy to have free access to certain content and the content owner can continue to make money through advertising.

Yet, one of the most important implications of having a free-ad supported content for The Film Detective was the positive impact it had on subscriber growth. They leverage free content as a tool to convert their viewers into paid subscribers, with low to zero customer acquisition costs.

Discover more tactics The Film Detective employed to build their SVOD service and how they continue to drive future growth. Get the case study

The “Freemium” Approach

Many SVOD services have the most successful offering multiple tiers of content offerings. That way viewers can choose to watch limited ad-supported content for free, or pay a subscription fee for access to exclusive and ad-free content. This hybrid approach to monetization enables content owners to reach a broad range of audiences while maximizing their video’s revenue.

Learn how successful SVOD services effectively leverage a hybrid monetization approach to maximize revenue for their video business - download Build, Launch, Grow!

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